CrowdStreet Review: How Does CrowdStreet Funding Work?

Chef TastyDecember 26th, 2023

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Table of Contents

What is CrowdStreet?

CrowdStreet is a platform that allows investors to contribute funds toward real-estate projects. Investors can pool together up to millions of dollars. The platform’s interface is very user-friendly and easy to use for sponsors and investors. It allows for easy management, decision-making, and supervision of real estate investments.

CrowdStreet started in the year 2014, and it gained prominence soon after. The platform has reportedly had more than 100,000 active users. Also, CrowdStreet has funded more than 215 real estate projects with the help of investors and individuals. Sponsors can fine-tune the details of their portfolios. They can decide to sponsor an individual project or invest in several projects. As expected, focusing solely on a single project increases the level of risk. Failure in such a sole project or portfolio would lead to a total loss of investment funds.

Those who invest in a varied portfolio tend to face lower risk levels. The tradeoff is that the profit margin is usually significantly lower than that of a single portfolio. CrowdStreet reports that more sponsors tend to invest in individual portfolios than a mixed portfolio.

How Good is CrowdStreet?

CrowdStreet has an excellent reputation and a record that is backed by countless positive reviews on the internet.

The platform supplies previously inaccessible options to their investors. Accredited investors have access to better options and portfolios. CrowdStreet competes well in the market with competitors like Diversyfund and Equity Multiple. If you want to learn about them as well, we got you covered. Here’s our Diversyfund Review and Equity Multiple Review to help you sort things out.

While CrowdStreet is one of the largest real estate platforms for crowdfunding, it has its pros and cons.

CrowdStreet Pros and Cons

Like all platforms, CrowdStreet has its advantages and disadvantages. Even so, the cons are significantly fewer than the pros.

Pros	Cons
Transparency: With CrowdStreet, you can directly make transactions with deal sponsors. Also, the platform provides track records for each sponsor. All parties can easily access deal results at any time. Experience and Success: CrowdStreet has successfully helped fund the development of more than 215 projects. The company has a good track record and success rate. You can utilize their tools and rest assured that your investment is in safe hands. Quality of Sponsors: All sponsors go through deep and detailed screening to ensure that only the best are allowed on the platform. Only sponsors with high-quality, responsive service are accredited. Tailored deals for individuals. User-friendly: The platform is user-friendly and easy for even the least tech-savvy people to use. The company is continually updating the user interface to include helpful projections and tools for comparing and contrasting deals. Also, the latest addition includes comprehensive portfolio analytics. IRA Accessibility. No fee for participating investors: Sponsors cover all required fees.	High Minimum Investment: The minimum investment price of $25,000 scares away many sponsors. Some sponsors simply cannot afford such a large sum of money, while others are unwilling to risk so much on a single deal. Limited / Zero Liquidity: You will need to wait for your project to mature and start earning returns on investments. There is no way to collect your funds before then. Also, there is no secondary market.

Pros

Cons

Transparency: With CrowdStreet, you can directly make transactions with deal sponsors. Also, the platform provides track records for each sponsor. All parties can easily access deal results at any time.
Experience and Success: CrowdStreet has successfully helped fund the development of more than 215 projects. The company has a good track record and success rate. You can utilize their tools and rest assured that your investment is in safe hands.
Quality of Sponsors: All sponsors go through deep and detailed screening to ensure that only the best are allowed on the platform. Only sponsors with high-quality, responsive service are accredited.
Tailored deals for individuals.
User-friendly: The platform is user-friendly and easy for even the least tech-savvy people to use. The company is continually updating the user interface to include helpful projections and tools for comparing and contrasting deals. Also, the latest addition includes comprehensive portfolio analytics.
IRA Accessibility.
No fee for participating investors: Sponsors cover all required fees.

High Minimum Investment: The minimum investment price of $25,000 scares away many sponsors. Some sponsors simply cannot afford such a large sum of money, while others are unwilling to risk so much on a single deal.
Limited / Zero Liquidity: You will need to wait for your project to mature and start earning returns on investments. There is no way to collect your funds before then. Also, there is no secondary market.

Is CrowdStreet Legal?

Many willing investors and sponsors have been skeptical about CrowdStreet, but the company’s record is a testament to their credibility. They have fully completed 19 projects since 2014, and 18 of those projects yielded more than the initially calculated returns.

The company is one of the largest in real estate crowdfunding industry. Furthermore, they have accrued over 367 offerings since they launched. In terms of performance, CrowdStreet has a high-end marketplace with a great user interface. It allows you to easily compare portfolios and decide on the one that is most suitable for you.

Furthermore, the investor dashboard keeps you updated with information pertaining to the real estate projects you have invested in. The platform also allows for direct communication between sponsors and investors. CrowdStreet also posts informative articles and videos which educate investors about many aspects of real estate investing.

Who Manages CrowdStreet?

Tore Steen and Darren Powderly are the founders of CrowdStreet. They both have impressive educational and work experience backgrounds.

Tore Steen has a rich background in the technology sector, while Darren Powderly is widely known as the former president of Compass Commercial. Compass Commercial is a first-rate commercial real estate company in the Pacific Northwest. Steen is a certified commercial investment member — an honor that is only given to those with widely accepted and recognized expertise in both commercial and real estate investment.

The Chief Investment Officer of CrowdStreet, Ian Formigle, is also a real estate investment expert. A team of analysts and investment managers carefully go through the details of each deal. Also, CrowdStreet has a team of due diligence managers and associates who go through sponsors’ applications and records to make sure they only accredit those who are suitable.

How Does CrowdStreet Work?

CrowdStreet provides a platform for accredited investors to crowdfund real estate projects. In other words, it’s an ideal platform for sponsors and investors to collaborate on real estate projects.

Furthermore, the platform provides information to investors. It educates them with frequent posts, videos, and webinars to keep them informed about real estate offerings in the marketplace and about many broad topics related to the real estate industry.

CrowdStreet has a detailed and easy-to-use interface for both sponsors and investors. It has uniform deal pages and provides valuable insider information, making investment decisions considerably easier. Sponsors and investors also have the option to communicate directly with each other.

Lastly, sponsors can make use of the platform’s tools to review and screen portfolios. They can also keep track of their ongoing projects.

There a number of real estate platforms like CrowdStreet that have similar and also unique features. Check out this top 5 real estate platforms to discover which is the best.

How Does CrowdStreet Review and Group Deals?

CrowdStreet takes deals through a rigorous screening and review process. They take into account a sponsor’s history, record, expertise, and experience. The platform’s first screening refuses about 75% of submitted deals. Then, additional screening eliminates about 95% of submitted deals.

The filters and screening tools are important to make sure deals are unique and personally tailored. Most of the company’s revenue comes from sponsors. Sponsors are required to pay deployment fees to put their investment opportunities in the marketplace. Sponsors also pay an annual subscription to maintain access to the marketplace technology.

The higher the number of sponsors and deals, the more revenue CrowdStreet stands to gain. It’s important to go through the “how-to” and “whys” of CrowdStreet deals before investing.

Ways to invest on CrowdStreet

CrowdStreet has three options for investing. They are:

Invest directly

You can choose to invest directly into individual deals. Sponsors typically choose deals with IRR targets of 12 percent to 21 percent over two to five years. Also, the minimum individual investment is usually $25,000.

Invest via CrowdStreet’s advisory services

CrowdStreet provides the benefit of investing in diversified real estate holdings that are only managed by professionals. The minimum investment for this option is higher than that of a direct investment. The minimum is $250,000.

Invest in diversified funds

There is the blended portfolio option which has a target investor internal rate of return of 18 percent and a period of five to ten years. A major downside of this option is that it ties down valuable funds for a long period of time because of its non-liquidity.

Another portfolio option is the Opportunity Zone Portfolio which has a target of 10 percent IRR for a period ranging between ten and twelve years. The minimum investment for this portfolio is the same as the direct investment portfolio — $25,000.

Who Can Invest on Crowdstreet?

Only accredited investors can invest on CrowdStreet.

How To Be an Accredited Investor?

A net worth greater than $1 million, without including the value of your personal residence.
A trust with assets of over $5 million.
A personal income of over $200,000 for a period of two years prior to investing, or, a joint income of more than $300,000 for two years prior to investing.

Conclusion

In conclusion, CrowdStreet is a great platform for crowdfunding real-estate projects. The pros are significantly higher than the cons, provided that one can meet the criteria and requirements. Crowdfunding has been a trend in the recent years, read our list of the top 10 real estate crowdfunding companies here.

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